CHART OF THE DAY: Everyone Interprets The Trade Deficit 100% Wrong

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As part of this morning’s trade balance report, the July trade deficit was revised wider from $44.8 billion to $45.6 billion.

Since the trade deficit gets subtracted from GDP, this is seen as a negative. ZeroHedge expects coming down ard revisions to Q3 GDP estimates.

That may be possible, but this misses the big picture.

Wide trade deficits are a sign of more robust growth.

Here’s a chart going back a long way that shows that nicely.

When the trade deficit is shrinking, GDP tends to shrink too, and when it’s widening, GDP widens too, even if the trade deficit comes out of GDP.

chart of the day, trade balance goods and services, october 2011

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